While Americans have seen the adoption of Bitcoin (BTC) spot and futures ETFs, the situation in Europe is different.
Bitcoin ETFs have been a hot topic for many months, as the approval of ETFs based on actual Bitcoin in the U.S. could potentially lead to an influx of funds from Wall Street institutions, possibly pushing the price of Bitcoin to new heights.
How do Bitcoin ETFs work?
Like traditional ETFs, Bitcoin ETFs are issued by financial institutions that invest in Bitcoin and manage the fund on behalf of investors. A Bitcoin ETF can be structured in various ways. For example, it may hold Bitcoin futures or “physical” Bitcoin as the underlying asset, managed by the ETF issuer on behalf of the investor.
In the case of funds with a Bitcoin base, the issuing institution buys BTC and holds it. Subsequently, it issues shares of the fund on a securities exchange, tracking the asset’s price. Investors directly own a portion of the underlying Bitcoin, and as the cost of BTC fluctuates, the value of the ETF changes accordingly.
One notable advantage of Bitcoin ETFs is their trading on regulated securities exchanges, providing accessibility to various investors and eliminating the need for technical knowledge in securely storing crypto assets.
As a result, investors new to cryptocurrencies can gain exposure to Bitcoin without requiring a crypto wallet or engaging in trading on a cryptocurrency exchange platform.
Bitcoin ETP: not to be confused with ETF
In addition to ETFs, exchange-traded products (ETPs) exist in the regulated investment markets. ETP stands for exchange-traded product, representing an investment product available on a stock exchange.
As the value and opportunity of the digital asset market grows, more cryptocurrency ETPs are coming into circulation, including ETPs for Bitcoin, Ethereum (ETH), and Litecoin (LTC).
What is known about ETP in Europe
Spot Bitcoin ETPs have existed in Europe for a long time, providing investors with access to digital tokens. Europe is much more progressive in terms of cryptocurrency products.
In May 2015, Swedish vendor XBT AB announced the authorization of Bitcoin Tracker One (a CoinShares product). It was the very first BTC-based security available on a regulated exchange. In October 2015, the company launched the euro-denominated Bitcoin Tracker EUR security system, available through Nasdaq Nordic.
